How Will the Plaza Play in Las Vegas?

Elad Properties and its president, Miki Naftali, are planning to expand the Plaza brand into other cities, including Las Vegas. Credit
Preferred Public Relations

ELAD PROPERTIES, the Israeli company that bought the Plaza Hotel in New York in 2004, eliminated 500 of the hotel’s 800 rooms in favor of expensive condominiums.

But if the company has its way, the number of Plaza Hotel rooms — worldwide — will eventually be in the thousands. Elad and its president, Miki Naftali, are planning Plaza hotels in London, Las Vegas and Shanghai, among other cities.

The Las Vegas Plaza, which is expected to include some 3,000 rooms, may be the first one to be built. Last year, Elad, which is controlled by the Israeli billionaire Yitzhak Tshuva, bought 35 acres on the Las Vegas strip, across from the Wynn casino resort, for $1.2 billion, with another Israeli company. The partnership then demolished the New Frontier, the 1,000-room hotel and casino that had occupied the site for half a century.

(A video of the demolition last November, complete with fireworks, is a minor hit on YouTube.)

Around the same time, the company began releasing renderings of a building based on the original Plaza Hotel, with its chateau-like facades, but vastly bigger — and with a projected price tag of about $4 billion. Like many other Las Vegas structures — which include the fake Eiffel Tower of the Paris Las Vegas hotel and the Manhattan skyscrapers of the New York-New York Hotel and Casino — the renderings showed a familiar design in an unfamiliar context.

“If you tried to build something like this in London, it wouldn’t be right,” he said.

But the project is moving more slowly than expected. This fall, Elad announced that it would take six months longer than originally planned to repay the Goldman Sachs Group and the Credit Suisse Group, which had lent Elad $625 million to buy the property.

And construction, originally scheduled to start this year, won’t begin until 2010, Mr. Naftali said.

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Miki Naftali outside the Plaza Hotel in New York. Credit
Hiroko Masuike for The New York Times

Construction costs in Las Vegas have nearly doubled since 2005, Mr. Naftali explained, adding, “It has been a nightmare.” The spike caused other companies to cancel projects altogether. (In 2007, a partnership of the Related Companies of Florida and the Related Group, canceled the Icon Las Vegas project, even after many of its condos had been reserved by buyers.) In a year or two, Mr. Naftali said, “we will be able to negotiate a good price for building the hotel.”

“Financing a project this size is not easy today,” Mr. Naftali said. “But we are not looking to finance the project today.”

If the hotel is built, it will have defied the odds. A number of Las Vegas hotel projects have been canceled, including a 3,000-room W Las Vegas — on which Starwood Hotels and Resorts Worldwide pulled the plug in 2007).

In August, the Boyd Gaming Corporation halted construction of a $4.8 billion project, called Echelon, that was to contain five hotels, three of which were already partly built. The Morgans Hotel Group, which was to build the other two, chose not to extend a joint venture with Boyd.

Altogether, the number of hotel rooms in the planning stage in Las Vegas has dropped to 15,000 from 21,000 a year ago, according to Chris Woronka, a hotel industry analyst at Deutsche Bank in New York.

“I wish I was that smart,” he said. “We were focused on the challenge posed by that building,” he said of the Manhattan landmark.

Many of the improvements to the building were designed by Gal Nauer, the daughter of Mr. Tshuva.

Much of that Plaza was converted into condos. But the hotel portion is a significant source of revenue, with standard rooms fetching about $1,000 a night. Mr. Naftali said that demand hasn’t flagged — thanks to favorable foreign exchange rates that make it seem “not that expensive” for Europeans.

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The old New Frontier hotel and casino was demolished last year to make room for the Las Vegas Plaza.Credit
Isaac Brekken/Associated Press

With the Manhattan building squared away, Elad realized that it could use the Plaza name in other cities. But that, too, hasn’t been problem-free. Last year, the Tamares Group, based in Vaduz, Lichtenstein, the owners of the Plaza Hotel and Casino, a 37-year-old hotel in downtown Las Vegas, sued Elad, alleging trademark infringement. A trial is under way in Clark County, Nev.

The planned expansion of the Plaza brand comes as developers aim to turn other Manhattan hotels, including the St. Regis and the Waldorf-Astoria, into national brands.

St. Regis — a division of Starwood — may be the furthest along. It now operates more than a dozen hotels, from Aspen, Colo., to the Pacific island of Bora Bora, and has plans to open branches in Mexico City this year and Atlanta in 2009.

(At the same time, the company faced a setback in Fort Lauderdale, Fla., where a St. Regis opened in May 2007. This summer, Starwood severed ties with the hotel, citing a contractual dispute. The hotel has since been rechristened a Ritz-Carlton.)

The Hilton Hotels Corporation, the owner of the Waldorf-Astoria brand, plans to open a 500-room outpost in Orlando next year, and has others in planning stages. Waldorf-Astoria hotels are also being planned in Montreal and Beverly Hills, Calif.

Eventually, there may be more than one city where the Waldorf, the Plaza and the St. Regis compete for well-heeled travelers.

But even Mr. Naftali acknowledges that there may be a limit to how many luxury hotels the market can bear.